colonial experience has often resulted in a legacy of concern that foreign direct investment may serve as a modern form of economic colonialism in which foreign companies might exploit the resources of the host country.In recent years, however, restrictions on foreign direct investment in many developing economies have been substantially reduced as a result of international treaties, external pressure from the IMF or World Bank, or unilateral actions by governments that have come to believe that foreign direct investment will encourage economic growth in the host country. This has resulted in a rather dramatic expansion in the level of foreign direct investment in some developing economies. One agreement, which will help in the increase of foreign direct investment, is the Multilateral Agreement on Investment. It increases the rights and opportunities of multinationals but does not hinder them with any increased responsibilities, or restrict the investment incentives offered by host countries. This is partly due to the influence of MNCs on the negotiations. Foreign direct investment may encourage economic growth in the short run by increasing demand in the host economy. In the long run however, the increase in capital raises the use of labor which leads to higher incomes. Another long-run impact, however, comes through "technology transfer," the transfer of technological knowledge from industrial to developing economies. Many economists argue that “this transfer of technology may be the primary benefit of foreign direct investment.”(4) It is often argued, however, that it is necessary to restrict foreign direct investment in a given industry for national security purposes. Multinational corporations (MNCs, which can be defined simply as companies which have operations in more than one country) account for over 70% of world trade. “Multinational investment has grown 13% per year through the last two decades - twice ...
